Q+A’s Guyon Espiner Interviews Labour Finance Spokesman, David Cunliffe

Points of interest:

- Labour to announce new tax policy this week, expected to include cutting GST on fruit and vegetables to zero

- GST-free fruit and vege would be “really good for Kiwis” and a narrow definition removes the need for “an army of bureaucrats”

- Labour has costed the policy at $250-270 million, similar to the amount raised by the increase in tobacco tax

- Cunliffe stands behind controversial GST brochures: “I wouldn’t call them misleading”

- Given the struggling economy, “This is absolutely the worst time… to be putting GST up”

- New Zealanders earning less than $80,000 per year will be “worse off” after government’s tax reforms

- Tax switch sees two-thirds go to the top third of earners and less than 2.5% go to the bottom third

- “We know we can’t buy popularity by spending taxpayers’ money”

- If Labour promises a new top tax rate it will be at a “six figure sum”

The interview has been transcribed below. The full length video interviews and panel discussions from this morning’s Q+A can also be seen on tvnz.co.nz at, http://tvnz.co.nz/q-and-a-news

Q+A is repeated on TVNZ 7 at 9.10pm on Sunday nights and 10.10am and 2.10pm on Mondays.

DAVID CUNLIFFE interviewed by GUYON ESPINER

GUYON Thank you, David Cunliffe, for joining us. We appreciate your time.

DAVID CUNLIFFE – LABOUR FINANCE SPOKESPERSON Thank you, Guyon.

GUYON You heard Bill English there. He’s basically saying the average worker could expect to be $15 a week better off after this tax switch. What’s wrong with that?

MR CUNLIFFE Well, there’s a couple of things wrong with it. Firstly, we don’t think the numbers are right at all, and secondly three-quarters of New Zealanders earn under the average wage and there’s going to be very little for them. The bottom line with this tax switch is there’s $2 billion into the government’s accounts and $2 billion out. But two-thirds of the money goes to the top one-third of people, and less than 2.5% goes to the bottom third, so go figure. Not everybody can be winning off this.

GUYON Is Bill English lying when he says the vast majority of New Zealanders will be better off come October 1?

MR CUNLIFFE Well, that depends on how you classify lying, but on our calculations, if you’re earning less than $80,000 a year, you are going to be worse off net after the tax change after forecast inflation and after other sneaky little rises like ACC car registration, power charges, etc.

GUYON OK, you’ve put out some pamphlets on this GST rise and one example you’ve given from the pamphlet that’s funded by the taxpayer, a man called Mote Pahulu goes to the supermarket and he spend $90.25 on some basic groceries. You then say in this Labour pamphlet, and I’ll quote it, ‘With GST rising to 15%, he will have to pay $15.34 tax on that same trolley.’ Now, anyone reading this material you’ve put out would think that prices would be going up $13 on that $90 worth of groceries. Is that really the case?

MR CUNLIFFE If it’s the pamphlet I think you’re referring to, what we did was we got some independent numbers on the average amount that New Zealanders spend on different types of groceries at different income levels, and we just simply ran out the GST numbers on those, and so those…

GUYON Yeah, but a $90 trolley of groceries will go up by how much under this GST increase, roughly?

MR CUNLIFFE Well, they’ll go up by 2.5%, which is the difference between the 12.5% GST that they’ve got and the 15% that they will be paying.

GUYON So something short of $2, so why are you putting out material saying that it’s going to rise by $13.50?

MR CUNLIFFE Because the total impact of GST on that grocery trolley will be that amount at the end of the day.

GUYON Did you think honestly, Mr Cunliffe, that they were fair brochures to put out, or did you think they were misleading?

MR CUNLIFFE Oh, I wouldn’t call them misleading at all. I mean, we’re looking at the aggregate impact of GST on New Zealanders. That’s a matter that we take to heart. My constituents are struggling. This is probably the absolute worst time, as New Zealand’s struggling to climb its way out of a recession, to be putting GST up on ordinary Kiwis. It’s just bad timing and it’s a bad move.

GUYON Just before I leave that pamphlet, the man who’s mentioned in it, Mote Pahulu – is he the same man who’s standing with George Hawkins in the supercity left-wing ticket in Manukau?

MR CUNLIFFE I have no idea, I’m sorry.

GUYON You don’t think that Labour putting that out and putting him just as an ordinary shopper was again slightly misleading?

MR CUNLIFFE Well, look, I’m sorry, I didn’t write the pamphlet and I don’t know Mote, and if it is the same one, well, that will be happenstance, but I can’t confirm that, I’m sorry.

GUYON OK, let’s look at what you’re going to do. Is it correct that tomorrow Labour is going to announce its policy of removing GST from fresh fruit and vegetables?

MR CUNLIFFE Well, it’s true that Labour will be making a positive announcement about GST this week, but it’s not for me to say on air what that’s going to be today, but I’d say watch this space. It’ll be good news for New Zealanders.

GUYON Well, let’s proceed, unless you want to deny it, on the basis that that’s what Labour’s going to do, because you’ve signalled this very clearly. How would this policy work? Would you allow fresh fruit and vegetables to go completely to zero for GST? Is that the thinking?

MR CUNLIFFE Well, it’s certainly an option that we’ve been considering very carefully, and we think that sort of option would, on balance, most likely be really good for Kiwis if it went through. It’s likely to increase the consumption of healthy food, and it’s certainly likely to save Kiwis money at the checkout counter.

GUYON You don’t think that it might be a little bit difficult to actually administer, where you get things like sun-dried tomatoes, for example, is one of the classics? I mean, aren’t you going to need an army of food police defining what is fresh fruit and vegetables and what is not?

MR CUNLIFFE Well, of course, Guyon, that’s the classic argument, but I think it’s only Slovenia in the Western world that has a high GST rate that doesn’t exempt some kind of food, and the great thing about fresh fruit and vegetables is most people actually know what a fruit is or vegetable is. There’s not a great deal of debate about it, and by defining narrowly it like that, if that’s what we do, that would certainly remove the need for an army of bureaucrats. It’s not the same things as, for example, Rahui’s bill – Rahui Katene – which has the phrase ‘healthy food’, and then you get in a big debate about what health food is. You know, is a raw chicken healthy? Is a cooked chicken? What about KFC? We’re not going to get into those debates if that’s the way we go.

GUYON How much is it going to cost, Mr Cunliffe?

MR CUNLIFFE I believe that if that policy were adopted, it would cost $250 million a year. Top range, $270 million, tops. Certainly less than the government estimated the Kahui bill to cost.

GUYON And where is that money going to come from?

MR CUNLIFFE Well, about the same, I observe, as the extra revenue coming in from increasing the price of tobacco – almost a wash.

GUYON So, what, is that going to be the trade-off? Where is this money going to come from?

MR CUNLIFFE Well, it goes into the same pot at the end of the day and comes out of the same pot, but, yeah, getting the price of cigarettes up has brought in about $200 million. Taking GST down to zero on fresh fruit and vegetables would cost $250 million. That’s pretty much a wash.

GUYON The way that Nation has organised its tax switch, it’s fiscally neutral, or doesn’t cost anything, in other words – if things go up on one side, they come down on the other. Is that your approach too?

MR CUNLIFFE If I can butt in there, that’s not exactly true of the Nation Party’s tax switch. They’re out $450 million.

GUYON Yeah, well, I don’t want to relitigate their policy. I’m talking about your policy, Mr Cunliffe. If you are going…

MR CUNLIFFE Well, we’ll certainly have a really credible tax and spending policy which will be fiscally responsibly which will see net debt come down over the medium-term. We know that we can’t buy popularity by spending taxpayers’ money, and what we’re going to be committed to is growing the pie on the basis of a solid plan for growth and jobs.

GUYON Will GST remain at 15% for all other goods, other than your fresh fruit and vegetables?

MR CUNLIFFE Well, we haven’t made our announcement about fresh fruit and vegetables, if that’s what it’s going to be. I say watch this space this week – there will be good news for New Zealanders, but I’m not going to pre-empt it today on TV.

GUYON But your general rate of GST – you must have done the maths. I mean, are you going to leave that at 15% or are you going to take it back to 12.5%?

MR CUNLIFFE Well, as I say, I’m not pre-empting the announcements of this week today on TV, but what I would tell you is if your last criticism or question was that somehow taking GST off fruit and vegetables was going to cost too much, then you should ask yourself how much it would cost to take GST off everything.

GUYON No, I’m asking you how you’re going to pay for it. That’s what I’m asking you.

MR CUNLIFFE Well, in the scenario that it’s a fresh fruit and vegetables issue, it would be $250 million. We believe that would be quite affordable – certainly pretty much covered by the tobacco tax increase.

GUYON You’ve also signalled that you’ll bring back the top tax rate at 38c in the dollar. Is that your thinking at this stage?

MR CUNLIFFE We’re actually working through a number of scenarios in terms of our tax-policy planning. That’s certainly one scenario that our leaders put out there, and it would be on the basis of a much higher threshold for the top rate. There are a number of other scenarios that we’re looking at as well.

GUYON At a six-figure sum?

MR CUNLIFFE If that scenario were pursued, yes, it would be a six-figure sum, but, as I say, there are a range of other scenarios that are being considered as well.

GUYON Alright, that’s pretty much all we’ve got time for, but thank you very much for joining us, David Cunliffe. We appreciate your time.

MR CUNLIFFE Thanks, Guyon.

ENDS

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